President of Cryptonomex, the company that authored the Graphene blockchain, originally developed as the foundation of Bitshares.

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With the news of Bitfinex and Tether being issued subpoenas by the U.S. Commodity Futures Trading Commission as recently as early December 2017, there has been one word looming over the markets and in investors’ minds: "regulation."

What are we to expect in the coming year with government involvement and more regulators looking to start intervening in the crypto asset world? The 2018 tax season is already going to be a headache for all investors, especially day-traders, due to the IRS closing the possibility of crypto-to-crypto exchanges falling under the “like-kind” provision of the tax code in IRC Code Section 1031.

The new updates mean that all crypto trading pairs (ETH/BTC, ADA/ETH, etc.) will now count as a “taxable event.” On top of that, everyday investors are seeing more and more government intrusion leading to a crackdown on initial coin offerings (ICOs) where regular individuals are not allowed to participate. In fact, if you visit a site advertising the launch of a new coin starting an ICO, there is typically a disclaimer warning that American citizens are not legally allowed to participate and might even have an IP reading tool designed to block those with a U.S.-based IP address from even accessing certain parts of the site. What a mess. Is there any way to solve this?

Legislation, Not Unelected Regulatory Bodies

As is often the case with most big change in the American system, powerful and standing decisions come from the legislature, not an unelected group with an insane amount of power. For government bodies like the Securities and Exchange Commission (SEC), the role is crucial for maintaining fair and open markets (think of cracking down on fraud, large companies exploiting certain groups, etc.).

As important as its role is, though, the SEC is not a group made up of elected officials. The commission is supposed to defend the American citizens from fraud, but it does not represent or create, the will of the people. The point of commissions like the SEC is to ensure the implementation and enforcement of laws already voted in by American citizens, not to effectively create their own.

If the overwhelming majority of Americans voted for a major crackdown on cryptocurrencies and other crypto assets and did not want them to be exchanged, traded or purchased, then we would be operating in a very different environment. But we’re not.

Instead, regulatory bodies have had to take it upon themselves to interpret laws already on the books that were not designed for the “new economy.” When discussing regulatory concerns for traditional asset classes and exchanges of securities (think stocks, bonds, forex trading, etc.), cryptocurrencies were not yet even in the public eye.

Because of a lack of written legislation dealing with crypto assets, deciding how to regulate them has been left up to the regulatory bodies and not the citizens up until now. There isn’t anything wrong with the SEC enforcing laws in the way it best sees fit; the problem lies in the fact that we, the public, have not given the SEC the appropriate laws to enforce and implement.

So we need to pass legislation, but what does it look like and how do we do it?

Wyoming Leads The Way

While Wyoming may not be the first state that comes to mind when thinking about places at the forefront of fintech and the new economy, it is one of the best examples of what every state should be striving for.

The Wyoming Blockchain Coalition has been working relentlessly to help get the state on track for proper regulatory definitions and has been making big changes in the crypto space for the state. The grassroots movement was founded to encourage more community engagement with the new technology and foster an environment in the state that is very business friendly for the nation at large to see.

With the support of the state’s Speaker of the House, 12 state senators and representatives from Wyoming have introduced H.B.0070, a bill created to counter the current issues we’re seeing in the regulatory handling of cryptocurrencies.

If passed, the bill will be the first legislation enacted to handle cryptocurrencies in an entirely separate manner rather than lumping them in with more traditional asset classes and trying to make the rules apply as best as possible (think of trying to fit a cube into a round opening -- it doesn’t typically work very well). The bill proposes that the state legally views tokens available from an open blockchain as neither money nor securities and thus forming an entirely new asset class.

Aside from House Bill 0070, there is more legislation in the works, nicknamed “The Bitcoin Bill” (H.B.0019) -- which would exempt all virtual currencies from the state’s money transmitter laws.

Not only are the legislative proposals from Wyoming a good sign -- they could also mean a big difference if a case between a private company and the SEC was to find itself on the desk of a federal court in 2018. Since the bills would be the only legislation passed on the handling of this new and growing asset class, they will take priority in consideration for ruling in accordance with already established laws.

But that’s not all. Wyoming has set a fantastic example for all states and all crypto enthusiasts. If we care about having laws that reflect public opinion and defend citizens, rather than punishing them, then we need to see more initiatives taking place across the country sooner rather than later.

Want to get involved? You can take action now by joining a blockchain or cryptocurrency group near you today.